Trending: How long we save up for a down payment

Published 9:35 pm, Wednesday, December 25, 2013

Saving up for a down payment on a home in Southwestern Connecticut is no easy task.

With many banks standing firm on the need for a 20 percent down payment these days and home prices topping out at well over $1 million, stashing away funds to make an offer on a "typical" home can take residents well over a decade, according to a Hearst Connecticut Newspapers analysis.

In Stamford, high home prices mean the city's average family would have to squirrel away 10 percent of every paycheck for roughly 14 years to be able to afford the $107,460 required for a 20 percent down payment.

"If you say to someone, `In order for you to have your home down payment in the next two years, you need to save $312 a week,' the answer could be, `You're an idiot. There's no way I can save that,' " said Michael Matson, of Matson Financial Advisors, Inc. in Danbury.

"We have some clients whose children are ... (saving) like half of their pay because they want to make sure this is happening short-term, and others who have a longer time frame, so maybe they're only saving 10 percent," Matson said. "But at a minimum, 10 percent would be what people should be setting aside for whatever kind of goals."

Of course, tucking away more money on a regular basis can speed up the process: Saving 20 percent would shrink the savings time for a down payment to about seven years, while saving 25 percent would drop it to about five-and-a-half years.

But that's a lot of money to ask someone to set aside, especially if they're paying rent while they're waiting. With a median rental price of $1,492 in Stamford, roughly 47 percent of renters dedicate more than 35 percent of their salaries to rent on a monthly basis, making it difficult to save large portions of their paychecks.

And if you're looking for a way to spend less than 20 percent on a down payment, it's likely you're out of luck these days.

"Unfortunately, the typical down payment now is 20 percent," said Patty Eilenberg, a Fairfield-based Realtor with Berkshire Hathaway New England Properties.

"That's what happened as a result of the banking correction," she continued, referring to the subprime debt crisis that helped lead to the Great Recession. "They're so worried about lending large amounts of money. And it's a logical thing to protect the lender, which is why 20 percent down is pretty hard and fast."

As with most rules, there are some exceptions, Eilenberg noted. For example, buyers who qualify for a loan through the government's Federal Housing Administration can qualify for a down payment as low as 3.5 percent, thanks to the government's insurance to the lender.

But not everyone qualifies for this assistance, leaving many to wonder how they're going to collect enough coin to make their dreams of becoming a homeowner become reality.

"You never want to give up, but how do you save up enough money, unless your parents are giving it to you, or if you have Wall Street money," Eilenberg asked.

It's a tough task.

For Greenwich resident Sarah Stempien, saving up for a down payment on her first home has meant living at home with her mother for the last several years to save up for her first home in town.

"I would rather buy than rent," Stempien said. "I feel like I would rather -- if I'm going to live somewhere -- I would rather the money go toward a mortgage and something I can use for years."

She's been tucking away funds for years. As a 25-year-old nurse at Greenwich Hospital, she's been stashing away part of her paycheck since she finished school.

And that's not all.

"I feel like you could say I've been saving my whole life," she said last week. "I have stocks and bonds I got when I was a baby, and money from Christmases and birthdays -- babysitting money from the seventh grade. I've saved a lot."

She's close to her goal of being able to finance a condo or townhouse in her hometown, but that's only been made possible by the fact that she's saving about half her paycheck -- something that's made possible by living at home.

"It's really hard to save up for a house," she said. "It takes a long time."